Scenario: Sam Dearing, Budding International Financier

Scenario: Sam Dearing, Budding International Financier
Sam Dearing is a summer intern in the arbitrage department at a prestigious Wall Street firm. Sam is hoping to be offered a full-time position at the firm after he graduates from college, and therefore, Sam knows that he must demonstrate a strong understanding of how exchange rates work.
-Sam's mentor at the firm told him that the ________ stipulates that an identical product must have an identical price in all countries when the price is expressed in a common currency.

A) exchange price
B) law of one price
C) fixed exchange-rate system
D) floating exchange-rate system

Correct Answer:

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